Authorized Capital Increase

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Increase in Authorized Share Capital – Legal Services by Nd Salva

As businesses grow, the need for capital increases. Whether you’re expanding operations, bringing in new investors, or funding strategic projects, increasing your authorized share capital is a crucial legal step that enables you to raise additional funds by issuing more shares.

At Nd Salva, we offer expert legal support to guide your company through every stage of authorized capital increase, ensuring compliance with the Companies Act, 2013 and a seamless execution of the process.

What is Authorized Share Capital?

Authorized capital (as defined under Section 2(8) of the Companies Act, 2013) is the maximum amount of share capital a company is legally allowed to issue to shareholders, as stated in its Memorandum of Association (MOA).

Note: Paid-up capital cannot exceed authorized capital. To issue more shares than currently permitted, a company must first increase its authorized share capital.

Why Increase Authorized Capital?

Increasing authorized capital allows a company to issue more shares and raise additional equity funding. Common reasons include:

  • Funding business expansion or new projects

  • Issuing new shares to investors or partners

  • Facilitating mergers or acquisitions

  • Converting debt to equity

  • Restructuring capital

  • Meeting regulatory requirements

Key Legal Considerations

  • Requires an amendment to the MOA

  • Must be authorized by the Articles of Association (AOA)

  •  Needs shareholder approval via Ordinary Resolution

  • Involves filing Form SH-7 with the Registrar of Companies (RoC)

  • Stamp duty payment required based on the increased capital

Form MGT-14 is NOT required for authorized capital increase in private limited companies.

Step-by-Step Process to Increase Authorized Share Capital

Step 1: Review AOA Provisions

  • Check if AOA allows capital increase

  • If not, amend the AOA first by passing a Special Resolution in compliance with Section 14 of the Companies Act

Step 2: Board Meeting

  • Send Notice to all directors (minimum 7 days in advance)

  • Pass Board Resolution to approve the capital increase and call for an Extraordinary General Meeting (EGM)

  • Approve draft notice for EGM with agenda and explanatory statement

Step 3: Conduct EGM

  • Issue EGM Notice to shareholders, directors, and auditors (minimum 21 days prior)

    • Shorter notice allowed with 95% shareholder consent

  • Pass Ordinary Resolution at the EGM for increase in authorized capital

  • Record detailed minutes and resolution

Step 4: File Form SH-7 with RoC

File Form SH-7 within 30 days of passing the resolution.

Details Required:

  • Company name and Corporate Identification Number (CIN)

  • Meeting details and resolution type

  • Original and revised authorized capital

  • Digital signatures and DINs

  • Stamp duty details

Documents Required:

  • Certified true copy of the resolution

  • Updated MOA reflecting the new capital clause

  • Updated AOA (if modified)

  • Optional supporting documents if applicable

Step 5: Pay Stamp Duty

  • Stamp duty is applicable on the increased portion of authorized capital

  • Payment can be made through the MCA portal as per respective state laws

Step 6: Update Company Documents & Records

  • Amend all copies of the MOA and AOA to reflect the changes

  • Ensure all internal and external stakeholders have access to the updated versions

Step 7: Allot New Shares (Optional)

After increasing authorized capital, the company may issue new shares to raise capital. This involves a separate share allotment process, including board approval, offer letters, and filing of Form PAS-3.

Penalties for Non-Compliance

Failure to follow proper procedure or delays in filing may attract penalties:

  • ₹10,000 for company/officers under Section 450

  • ₹1,000 per day of delay (up to ₹25 lakhs for SH-7 filing)

  • Risk of rejection by RoC or legal invalidity of new share issues

Why Choose Nd Salva for Authorized Capital Increase?

At Nd Salva, we ensure that your authorized capital increase is handled professionally, timely, and in full compliance with regulatory standards.

Our Services Include:

  • Legal vetting of MOA and AOA

  • Drafting board and shareholder resolutions

  • Assistance in conducting board and general meetings

  • Filing of Form SH-7 and stamp duty support

  • End-to-end regulatory compliance and advisory

  • Transparent fees and timeline commitment

Ready to Increase Your Company’s Authorized Capital?

Whether you’re scaling operations or onboarding new investors, we’ll help you take the next step with confidence.

Contact us today to get started with a consultation.
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